"What is dagger?" is a reference to the difficulty of playing many text adventures, particularly older ones. Text adventures often have a very limited vocabulary and take an extremely literal translation of what the player says. As a result, many red herrings exist in these games—for instance, objects that are described in game text but are not actually a part of the game, like the daggers in Strong Bad's text adventure.

The parser in this instance is probably having trouble telling the two daggers apart, another frequent problem with early text adventures.